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October 23, 2017

ECB published a report on financial structures in the euro area, which reviews the main structural features of, and developments in, the broader euro area financial sector. The report covers the banking sector (monetary financial institutions, or MFIs), insurance corporations and pension funds, and other financial intermediaries (OFIs).

The first chapter of the report presents the evolution of the overall structure and composition of the financial sector, also analyzing the interconnectedness across different parts of the financial sector to assess possible structural risks to financial stability. The second chapter presents structural developments in the euro area banking sector, providing a wide set of structural information from both a cross-sectional perspective (that is, different banking types, business models, etc.) and a time perspective. The third chapter discusses structural developments in euro area insurance corporations and pension funds. Although the sector continued to grow, it remained strongly concentrated in a relatively small number of countries, with France and Germany each accounting for more than a quarter of this sector in the euro area, followed by the Netherlands (18%) and Italy (10%). The fourth and final chapter reviews the structural features of the euro area non-bank financial sector, including all other financial intermediaries, except insurers and pension funds. Structural features of different parts of the non-bank financial sector are outlined in more detail, namely for non-money market investment funds, money market funds, and financial vehicle corporations.

The report shows ongoing consolidation in the banking sector while assets in the investment fund sector grew by 7% in 2016. Euro area banks’ median common equity tier 1 ratio rose to 15.4 % in 2016, from 14.4 % in 2015. While the median nonperforming loan (NPL) ratio declined further, the stock of NPLs remained persistently high in a number of countries. Solvency position of the insurers and pension funds is well above the requirements of the EU’s Solvency II supervisory regime. This report serves as a complement to the semi-annual ECB Financial Stability Review (FSR), which focuses more on cyclical factors.

 

Related Link: Report on Financial Structures (PDF)

Keywords: Europe, EU, Banking, Insurance, Securities, Basel III, Solvency II, ECB

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